Kumaraswami Sastri, J.
1. These appeals relate to the validity of the transfer of certain shares in limited companies governed by the Indian Companies Act.
2. One Venkatasubba Rao owned shares in Sri Krishna Cotton Press Co., Ltd., Guntur, Sri Krishna Jute and Cotton Mills Co., Ltd., Ellore, Bezwada Tripurasundari Cotton Press Co., Ltd., Bezwada and Sri Krishna Mill Co., at Masulipatam. He was indebted to Thadipalli Venkataramayya and in consideration of the money due to him he executed a deed of transfer Ex. L. dated the 20th April 1912 whereby he transferred the shares mentioned in that document for a sum of Rs. 3000. The deed is in the usual form and is signed by Venkatasubba Rao only. Notice was given of this assignment to the various companies whose shares were transferred but the transferee was not registered as a share-holder owing to objection being taken as to the form of the transfer not complying with the articles of association and owing to prohibitory orders having been received by the Companies in respect of the shares. It appears that after the sale and before notice to the Companies these shares were attached by prohibitory orders in execution of decrees against the transferor, and they were subsequently sold in execution and purchased by strangers. The competition is between the auction purchasers at the court sales and the transferee under the deed of assignment Ex. L.
3. As regards the shares held in limited companies, it is important to consider the provisions of the Civil Procedure Code as regards the attachment and sales of shares held by judgment debtors in companies governed by the Indian Companies Act. Order 21 Rule 46 enacts that in the case of a share in the capital of a corporation attachment shall be made by a written order prohibiting the person in whose name the shares may be standing from transferring the same or receiving any dividend thereon and a copy of the order being sent to the proper officer of the corporation. Rule 76 provides that where the property to be sold is a share in a corporation the Court may instead of directing the sale to be made by public auction authorise the sale of such instrument or share through a broker. Rule 79 clause (3) provides that where the property sold is a share in a corporation the delivery thereof shall be made by a written order of the Court prohibiting the person in whose name the share may be standing from making any transfer of the share to any person except the purchaser or receiving payment of any dividend or interest thereon and the manager, secretary or other proper officer of the Corporation from permitting any such transfer or making any such payment to any person except the purchaser. Rule 80 provides that where the execution of a document or the endorsement of the party in whose name a negotiable instrument or a share in a Corporation is standing is required to transfer such negotiable instrument or share, the Judge or such officer as he may appoint in this behalf may execute such document or make such endorsement as may be necessary and such execution or endorsement shall have the same effect as an execution or endorsement by the party. In the present case the shares were attached by prohibitory orders in form required by (he Code and they were sold and necessary notice was given to the companies concerned. So far therefore as the court purchasers are concerned, it is clear that the provisions of the law necessary to transfer the shares to them have been complied with, the only formality remaining is the actual transfer of the shares' in their names in the companies' books. Both under the Companies Act and under the Articles of Association of the various companies the Directors have a discretion to transfer the shares in the names of the auction purchasers. It is argued by Mr. Krishnaswamy Iyer that when there is a court sale and a purchaser under it there is no discretion left for the directors that they are bound to transfer the shares. It is argued by Mr. Narayanamurthi for the other side that there is nothing in the Companies Act or the Articles of Association to make any difference between private sales and sales in execution of decrees, the necessity for the sanction of the directors being to prevent undesirable persons or debtors of the company from getting transfers of shares. The reason applies with equal force to private or court purchasers. We agree with the view taken in Manilal Brijlal v. The Gordhan Spinning and . I.L.R.(1916) 41. Bom. 76 that there is still a discretion in the Directors to recognise or not purchasers in execution of decrees. So far as regards the transferee from the shareholder under Ex. L is concerned, it is clear that the document of transfer does not conform with the provisions of the Companies Act or with the Articles of Association of the Companies. The present case is governed by the Companies Act of 1882 and by the Articles of Association of the various companies. It is clear that both under the Act and the Articles of Association the instrument of transfer of the shares of the Company has to be executed both by the transferor and transferee and in the form prescribed. So far as the transferee is concerned, the form contains a statement by the transferee that he agrees to take the shares subject to the condition on which the vendor himself holds the shares. The Act also provides that the transferor shall be deemed to remain the holder of the shares until the name of the transferee is entered in the Companies registers (See Table A I schedule). Section 44 of the Companies Act of 1882 enacts that the share or other interest of any member in a company shall be movable property capable of being transferred in manner provided by the regulations of a company. As observed by Channell, J. in Torkington v. Magee (1902) 2 K.B. 427 shares which can only be transferred in a manner provided for in the Companies Act are not choses in action. Section 137 of the Transfer of Property Act excepts shares in Companies from the chapter dealing with transfers of actionable claim. Section 26 of the English Act of 1866 requires that the deed of transfer should be executed by the transferor and transferee and duly entered in the register of transfers while Article 18 of Table A of the English Companies Act of 1908 makes a slight alteration and directs that the instrument of transfer should be executed both by the transferor and transferee and states that the transferor shall be deemed to remain the holder of the share until the name of the transferee shall be entered in the register. So that both under the English and Indian Law the deed of transfer has to be executed both by the transferor and transferee. The question therefore is whether a deed not complying with the terms of the Act, and the Articles of Association is valid to transfer shares as against a person who has acquired the right to them by a court sale in manner required by the provisions of the Civil Procedure Code. The contention for the court purchaser is that where the law prescribes a mode of transfer, that is the only mode which is capable of passing property and that any other mode, although it may as between the transferor and transferee give him a right to complete his purchase by compelling the transferor to execute the necessary transfer as required by the Act will not avail against third, parties. For the private transferee it is contended that his acquiring an equitable title is good not only against the transferor but against third persons also. We are of opinion that the contention of the court purchaser is well founded and that where the law prescribes a mode of transfer, compliance with that mode is necessary before property can pass so as to confer title against third persons. In Mc. Euen v. West London Wharves and Warehouses Company (1871) 6 Ch. A. 655 where there was a transfer of shares but not in manner required by Act of Parliament it was held that the transfer of those shares in any other form would at least amount to an equitable contract and that even if the Company Act upon the transfer and receive payments from the person who entered into that equitable contract and issue documents and treat him as a share-holder, it would not have the effect of making him a real share holder. Sir George Mellish, L. ]. observed 'If a share-holder in a company whose shares by Act of Parliament can only be transferred by deed and by an alteration in the register, thinks tit to sell them in another way, which can only make an equitable contract at most, and the Company so far act upon it that they receive payments from the person who has entered into that equitable contract and perhaps issue documents treating him as their share-holder and calling him their share-holder, does that have the effect of making him the real share-holder Now it is obvious that if we were to hold that it had that effect, the consequence would be that the provisions of the Act of Parliament that shares should only be transferred by deed would be entirely eluded; and any person who examined the register whether a creditor who wished to know who the shareholders were in the Company, or a share holder who wished to know who his Company shareholders were would be entirely deceived. None of the numerous cases cited appear to me to establish the proposition that when a person has once become a legal share holder he can be freed from his liability to pay the calls simply by showing that he has made a contract which is void at law, but possibly may amount to an assignment in equity, and that the company to a certain extent has adopted that contract,' In Moore v. North Western Bank (1891) 2 Ch. 599 (602-3) where the competition was between two persons claiming title to shares registered in the name of a third person in a company Romer, J. observed : 'As . between two persons claiming title to shares in a company like this, which are registered in the name of a third party, priority of title prevails, unless the claimant, second in point of time, can show that as between himself and the company and before the company received notice of the claim of the first claimant he, the second claimant has acquired the full status of a shareholder or at any rate that all formalities have been complied with and that nothing more than some purely ministerial act remains to be done by the company, which as between the company and the second claimant the company could not have refused to do forthwith; so that as between himself and the company he may be said to have acquired in the words of Lord Selborne 'a present absolute unconditional right to have the transfer registered before the company was informed of the existence of a belter title.' For that proposition the case of Societe Generate de, Paris v. Walker (1885) 11 A.C. 20 and Roots v. Williamson (1888) 38 Ch. D. 485 are sufficient authorities and I need not refer to the cases cited by the defendants in argument which were decided previously to Societe Generate de Paris v. Walker (1885) 11 A.C. 20 '. This case has been followed in R.D. Sethna v. National Bank of India I.L.R(1911) . 36 Bom. 334 and the principle applied to the facts of that case. Societe Gencrale de Paris v. Walker (1885) 11 A.C. 20 is also a case of competition between two transferees neither of whom were registered in the books of the company and it was held that the person who had the prior equitable title was entitled to preference. Lord Selborne after observing that a merely inchoate title by an unregistered transfer would not for the purpose of the case be equivalent to a legal estate in the shares and be sufficient to give priority against a prior transferee who had given notice of the prior equilable title to the company so as to compel the company to register the shares in the name of the applicant observed as follows :--' If indeed all necessary conditions had been fulfilled to give the transferee as between himself and the company, a present absolute unconditional right to have the transfer registered before the company was informed of the existence of a better title, the case might be different' and on the facts of the case he held that no such right was acquired by the subsequent transferee so as to give him priority. Where the law prescribes a mode of transfer any transfer otherwise than by the manner prescribed by law will not confer a valid title. So far as the Madras High Court is concerned it has set its face against what may be called the equitable construction of statutes. In Kurri Vcerareddi v. Kurri Bapireddi I.L.R. (1906) Mad. 336, it was held that the provisions of Section 54 of the Transfer of Property Act which provides for the mode of transfer of immoveable property are imperative and that courts would not be justified in disregarding them on equitable grounds. This decision was followed by another Full Bench of this Court in Ramanathan v. Ranganathan I.L.R.(1917) Mad. 1134 , where the observations of the Privy Council in Mahomed Musa v. Aghore Kumar Ganguli I.L.R. (1914) Cal. 801, and Venkayyamma Rao v. Appa Rao I.L.R. (1916) Mad. 509, are explained as not overruling the principle laid down in Kurri Vcerareddi v. Kurri Bapireddi I.L.R. (1906) Mad. 336 . Though a different view has been taken in Calcutta and Bombay in Akbar Fakir v. Intail Sayal (1915) 29 I.C. 707, Syamkisor v. Dineschandra (1918) 31 Cal L.J. 75 and Bapu Apaji v. Kashinath Sadoba I.L.R. (1916) Bom. 438 , the decision of our High Court is binding on us and we do not think we can hold that a transfer otherwise than as is provided by the Companies Act and the Articles of Association can be valid. Treating the right of the private transferee therefore as merely a right in equity to compel the vendor to execute a proper conveyance and the transaction evidenced by the transfer as merely an agreement to convey, capable of being perfected into an absolute conveyance by complying with the rules laid down in the Companies Act and the Articles of Association, the question is whether he has any priority over the auction purchaser in a court sale who has given notice to the Company of his purchase. We do not think he has any such priority.
4. As regards purchasers in court sales where the sale is confirmed and the provisions of the Act are complied with there is nothing further to be done by the transferee or by the Court, When an order is issued under Sub-clause 3 of Rule 79 of Order 21, C.P.C. the company acting through the secretary or proper officer could not make a transfer of the shares to anybody else. It has either to recognise the transfer or refuse to recognise it. Form 34 of App. E of the Civil Procedure Code is the prohibitory order contemplated in Rule 79, clause 3. It is addressed to the Secretary of the Company and recites the fact of the purchase by the auction purchaser of the shares specified in the order and prohibits the company from making any transfer of the shares to any person except the purchaser or from receiving any dividend thereon or from permitting any transfer or from making any payments to any person except the purchaser. It is issued under the Seal of the Court and signed by the Judge.
5. We do not think that on the confirmation of the sale and the issue of the order any further steps are required to be taken by the Code There is no provision in the Code which requires the execution of any further documents by the Court. In the view we take of the case the court purchaser in the present case has taken all the nscessary steps and brought matters to a stage where all that remains is for the Company to signify or withold its assent and he is therefore entitled to priority over the transferee from the shareholder who has not got an assignment in manner required by law and is merely in the position of a person who holds an equitable contract. In Second Appeal No. 1719 there is the further fact that the Court purchaser applied for the registration of the transfer and got his transfer recognised by the Company.
6. Second Appeals Nos. 1719 and 1773 of 1919 are allowed with costs throughout and Second Appeal No. 1626 of 1919 is dismissed with costs of 2nd defendant throughout.
7. I agree.